03 Apr Bankruptcy: “But I Don’t Want to File On….”

Filing bankruptcy means listing all your debts, even those you eventually plan on repaying after bankruptcy, like debts to relatives or your mortgage and car payments.

As I tell my clients, you need to list anyone in the Milky Way Galaxy to which you owe money. That means even those who think you owe them money when you actually don’t. (We call those debts “disputed” and list them that way.)

You can’t pick and chose which debts you’ll list anymore than you can pick and choose which assets you’ll list.

One of the most important things to realize about filing bankruptcy is that you must provide accurate information to your bankruptcy lawyer. Remember, she may know a lot about your case, but ultimately, it’s up to you to make sure your bankruptcy paperwork it accurate.

And failing to list a debt can lead to pretty painful consequences. First, the debt may not get discharged. This is especially true in a Chapter 13 bankruptcy or a Chapter 7 bankruptcy in which the trustee has assets to distribute to creditors.

Second, even if you catch the error later, you may have to file a motion to reopen your case to add the creditor if you discover the error after the case closes. Some bankruptcy courts–like ours here in South Carolina–don’t require you to reopen the case. But many do. And that leads to more costs and fees for you.

Remember that just because a debt is discharged in your bankruptcy doesn’t mean you can’t pay that debt back. The key is waiting until after your case is over. If you want to pay someone back, you can. In fact, the Bankruptcy Code specifically allows this. Section 524(f) provides that “[n]othing contained in [this section] prevents a debtor from voluntarily repaying any debt.” You have the U.S. government’s blessing.

So there’s nothing wrong with paying creditors back, even if you file bankruptcy. But that doesn’t mean you don’t have to list them. As with anything else in your bankruptcy schedules, you represent that you they are correct under penalty of perjury. Accuracy is required, and lack of accuracy can cause you big problems during your case–and afterward.

Russell A. DeMott is a Charleston, South Carolina bankruptcy lawyer who represents consumer debtors in Chapter 7 and Chapter 13 bankruptcy. He is the author of the Charleston Bankruptcy Blog. He is also a member of the South Carolina Bankruptcy Blog. He files bankruptcy cases for clients in the Charleston, South Carolina division, which runs from Myrtle Beach to Beaufort. The DeMott Law Firm also represents clients in foreclosure defense and mortgage modification. You can also connect with Russ on Google Plus Russell DeMott. Russ can be contacted directly at (843) 695-0830 or by email at russ@demottlawfirm.com.